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Operations Management

Notes 2. Operational: What are the performance targets and needs of the manufacturing process
and the supply chain? What are the optimal supply chain arrangements for meeting those
targets? In the case of the TELCO, the closest forging units were Wyman Gordon and
Bharat Forge. Both were on the west coast, while Jamshedpur was located on the east coast.
Neither of these companies was in a position to come forward in delivering in a crisis.
3. Organizational: Does the linking of manufacturing strategy to business strategy, achieve
results that meet the objectives? Vertical integration is generally attractive when input
volumes are high. High volumes permit task specialization and greater efficiency.
Established companies, whether they manage reconfigured networks or operate long-
standing internal ones, seldom have the skills to transform their supply chains.
Senior managers must use this three – dimensional perspective to assess, first, internal operations;
then, external capabilities; and, finally, what combination of the two can create the most value
and capture it through managing the network effectively. The schematic representation of the
steps and actions involved are depicted in Figure 3.5

Figure 3.5: Framework for Outsourcing Decisions

Source: Adapted from Stephen J. Doig, Ronald C. Ritter, Kurt Speekhals, and Daniel Woolson, Has
outsourcing gone too fair? The Mckinsey Quarterly, 2001 Number 4.

A new concept of virtual factory is now finding acceptance. Manufacturing activities are carried
out in multiple locations by suppliers and partner firms form a part of a strategic alliance or a
larger "supply chain." The role of manufacturing in one central plant is eliminated. The virtual
factory may have no manufacturing organization, but manages the integration of all steps in the
process-no matter where physical production actually takes place. The implications for process
planning are profound: This will change the role of Operations Management from monitoring
activities in manufacturing to a deep understanding of the manufacturing capabilities of the
production network and task co-ordination.

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